COMPUTER MARKET

25. The Need for Speed Slows Down

by Megan Santosus

For the PC industry, the introduction of ever-speedier computer chips used to translate into increased sales as consumers eagerly upgraded their desktops to get the latest, fastest technology. According to a recent survey, however, the correlation between computer speeds and consumer buying has vanished.

Since 1994, Odyssey, a San Francisco-based market research and consulting company, has surveyed consumers twice a year regarding their computer use and spending plans. Last July, when Odyssey polled 2500 US households for its most recent survey, a little more than 10 per cent of respondents who already own a PC said they were very likely to buy a new machine within the next six months. That's the lowest percentage since 1994, and down from more than 20 per cent in 2000. While the shaky US economy accounts for some reluctance to upgrade, Sean Baenen, Odyssey's managing director, says the trend reveals a more troubling reality for the computer industry.

Traditionally, existing PC owners were desirable targets for PC makers because they already were sold on the value of computers, and they tended to trade up to more expensive machines with higher margins. Now that fewer of those folks plan on buying the latest speed demons, the industry's flagging fortunes are likely to continue until computer manufacturers overhaul their marketing approach. "PC manufacturers have been pushing more technology at lower prices, but that's not the message consumers are interested in," Baenen says. "Half of households with PCs have no idea how big their hard drives are or the speed of their processors; consumers look at PCs as a way to solve a problem." For most consumers, e-mail, surfing the Internet and word processing work just fine on the machines they currently own. In other words, says Baenen, the beefed up machines offered by PC makers may be flashy, but they don't provide consumers with new and compelling benefits. Hence, sales are dismal and the future looks bleak. Baenen contends that PC makers can turn the tide by coming up with solutions to real consumer problems instead of fixating on speedier processing. One area that's fertile for innovation is broadband. "It's a pain to get a broadband connection, so if PC makers could figure out a way to make machines broadband-ready out of the box that would be a compelling benefit to upgrade," Baenen says. Such an approach would also lift the fortunes of software developers and online service providers. In the meantime, PC makers will have to make do with sluggish sales.